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Reflections on American Money, Private Wealth, the National Debt and Alternatives for Redemption Paperback – November 16, 2012
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President Barack Obama was reelected to a second term on November 6, 2012. He and the Republic majority in the House of Representatives have until the end of December 2012 -- less than two months away -- to avoid the "fiscal cliff" of automatic tax increases and spending reductions, that is said to threaten another American recession, on exactly what basis has not been said.
The dilemma of an unprecedented U.S. national debt, now equaling the nation's Gross Domestic Product, and soon creeping beyond it, was wisely left out of the presidential debate, except for a few stabs by the Republican candidate. The total US federal government's debt including "entitlements" or unfunded obligations os over $60 trillion, and is beyond redemption from tax revenues, and, as has been the way of the past, will be somewhat `controlled' by inflation as a tax that no one can escape, unless a plan for orderly redemption is adopted and executed, which no one expects; whether it is because of a lack of planning, ill-use of time, short-sightedness, a head-in-the-sand-syndrome. Democracy may not be the best form of government. Every elected official must be an opportunist, as s/he faces a limited term in office, and must stay clear of loosing propositions to be re-elected, cataclysmic events excepted. The "political time horizon," combined with the duration of a leader's expected tenure in office, affects a government's willingness (or rather unwillingness) to act with foresight. Removing a road block miles ahead of us may in fact be perceived by the public as creating the problem which no-one can see, or is willing to admit... yet.
Rocky Anderson, lawyer, former mayor of Salt Lake City and founder of the Justice Party: "Those who are elected take advantage of a corrupt system that has brought us the plutocracy we have today. They should never be trusted to reform that system. Today is not unlike the situation before woman's suffrage or the labor and civil rights movements. There was so much inertia on the part of our elected officials that it took people at the grassroots level organizing, mobilizing, and making it clear that they were not going to let up until there was change."
The method of `financing' the national debt, according to JM Keynes's discussion (cited in the book) would be inflation, because both, taxes and a capital levy, "provoke violent prejudice by coming into conflict with the deep instincts by which the love of money protects itself."
If the national debt rises from $16 trillion to $105 trillion in the remaining 8 years in this decade (say 2012-2020) `financed' by inflation, it follows that the money supply rises accordingly from currently some $10 trillion to the level of about $80 trillion. If nothing is done, which is the general expectation (or resignation), there is, however, also a bright side to the apocalypse:
* debtors of old dollars will be effectively discharged;
* America will be a nation of millionaires, thousands of billionaires and a few trillionaires;
* everyone including the lower 80% of the population will have money in their pockets, although it will not be worth a lot;
* the failure of Lehman Brothers, the bankruptcy of General Motors and the Global Financial Crisis as a whole will be seen as Halloween spook of the glorious past.
* Eventually, a new dollar will be issued in exchange for the old by dropping two decimals reducing the nominal National Debt back to $1 trillion, a kind of renomination (but without debt repudiation) that had been imposed by the victorious American military government on defeated Germany in 1948, creating the Deutsche Mark that became the backbone of the Euro half a century later.
* The new American one dollar bill will show the portrait of a popular president, as always; no particular qualifications are needed. Perhaps it will be Bill Clinton's turn, or George Bush's, the son, or even the current President, Barack Obama. Jimmy Carter could give the new 2020 IS dollar a nickname: "Brother can you lend me a Jimmy?"